Middle East Conflict Disrupts Global Chip Supply Chains, Hiking Costs and Delaying Deliveries in Europe

The Chip Industry Faces Challenges from a Distant Conflict

The chip industry is experiencing disruptions caused by a conflict that has little direct connection to most of its manufacturing facilities. European companies, which rely heavily on semiconductors from Asia, are now facing higher costs and longer wait times due to the war in the Middle East. This conflict has disrupted key air cargo routes, leading to significant challenges for global supply chains.

Since the war began on February 28, attacks on shipping and airports have made freight planning increasingly difficult. According to DSV, global air freight capacity has dropped by about 9% compared to pre-war levels. European buyers are already relying on backup stock to maintain production, while some are also reducing their chip shipments from Asia due to limited cargo space.

Before the conflict, many cargo planes traveling from Asia to Europe used Middle Eastern airspace or stopped at regional hubs for refueling. However, this route is now under pressure due to Iranian attacks on infrastructure, including airports. As a result, the war has significantly impacted air cargo capacity, leading to increased shipping costs and delayed deliveries across Europe.

Impact on Semiconductor Deliveries

Razat Gaurav, CEO of supply chain software company Kinaxis, noted that some European chip foundries, automotive manufacturers, and contract manufacturers have already faced delays in semiconductor deliveries. He mentioned that customers purchasing these parts may have stock that lasts anywhere from one week to several months, depending on the business.

Despite these challenges, companies are in a better position than they were during the COVID chip shortage. Many supply chains have been strengthened since that period, and more companies have built larger inventories to mitigate risks.

South Korea’s industry ministry highlighted its reliance on the Middle East for 14 chipmaking items, including bromine and inspection equipment. The country also gets about 70% of its oil from the region. If oil prices continue to rise, electricity costs at home could increase as well. Another weak point is naphtha, as 54% of South Korea’s naphtha imports pass through the Strait of Hormuz. Prolonged fighting could further tighten transport routes and cause logistics costs to rise again.

Disruptions in Helium and Petrochemical Flows

The war has also disrupted flows of helium and petrochemicals, causing chip stocks to fall across Asia. SK Hynix stated that it has diversified its supply chains and maintains enough helium inventory to limit the impact of the Iran conflict. TSMC and GlobalFoundries are closely monitoring the situation, with GlobalFoundries maintaining direct contact with regional partners and preparing steps to reduce risk.

Meanwhile, Asian technology stocks experienced declines on Thursday following Iran’s latest attacks on Qatar’s Ras Laffan Industrial City and a surge in oil prices that affected investor sentiment. SK Hynix fell 2.23%, Samsung Electronics dropped 1.8%, and Seoul Semiconductor lost 2.53%. In Japan, Advantest fell more than 4%, while Tokyo Electron dropped 1.99%. In Taiwan, TSMC lost 2.1%.

In China, MiniMax fell 10%, and Knowledge Atlas Technology, also known as Zhipu, dropped 8% after an earlier rally linked to positive comments from Jensen Huang on AI agents and OpenClaw. In Hong Kong, Alibaba fell 3.34%, and Tencent lost 6%.

Raw Materials and Manufacturing Concerns

The raw materials side is also showing signs of instability. Products tied to Middle Eastern energy markets are essential for electronics manufacturing, from printed circuit boards to semiconductor process chemicals. Helium is a major concern because it is crucial for the semiconductor industry, and Qatar produces more than one-third of the world’s helium as a by-product of natural gas processing.

Beyond helium, wider petrochemical supply lines are also under pressure. The Gulf remains central to hyperscale infrastructure growth, semiconductor manufacturing, and electronics production. These disruptions highlight the interconnected nature of global supply chains and the far-reaching impacts of geopolitical conflicts.